News Feature | June 23, 2014

Lower Q1 GDP Estimates Linked To Drop In Healthcare Spending

Healthcare spending trends can be difficult to follow, but they’re important information to any solutions provider looking to not only plan their business, but also stay mindful of the environments their clients are functioning in.

Healthcare Spending And The Economy

Reports have recently been made of a drop in healthcare spending being at the root of a weak first quarter U. S. GDP in 2014. The Commerce Department, in their quarterly services survey (QSS), announced that healthcare spending was not as strong as the government had estimated when it published its second GDP estimate in May. The report spells out a 1 percent annual rate of contraction in the first quarter, while economists estimate that actual growth probably declined at a rate of at least 1.7 percent.

This type of revision though, according to CNBC, is not uncommon for the government to make, and that even if the economy proves to be much weaker than estimated; there is little cause for concern.

The contraction in healthcare specifically represents spending (much attributed to the Affordable Care Act) that added only about 0.7 percentage point, while the QSS estimated a full point.

The Other Side Of The Coin

Reports on the state of healthcare spending are mixed though.

While hospital revenue dropped from $246.6 billion to $244.8 billion between the fourth quarter of 2013 and the first quarter of 2014, revenue at general surgical hospitals fell a full percent, and revenue for the sector rose only 2.9 percent for all of 2013, estimates around the direction of future spending appear somewhat more promising. The Bureau of Economic Analysis reported that spending grew at 5.6 percent in the fourth quarter of last year. Also, the Altarum Institute reports that healthcare prices were up 1.6 percent in April of this year compared to the same period one year ago. They also reported that hospital prices were up 2.1 percent, an increase from the 1.3 percent growth seen in March of 2014.

Other Forces At Play

Still though, pushes for Big Data and more price transparency promise that the future of healthcare spending may intentionally be dropping off, and the move is gaining increasing support from politicians and policymakers alike. According to Democratic senator Ron Wyden, “This whole sector now known as ‘Big Data’ can knock down those health care silos, connecting providers across these various settings and states. It can empower consumers and patients — in effect putting them in control of their own care —and it can help physicians identify patterns in real time to get them better care ... But right now the status quo sort of ties our hands — it limits providers, patients, consumers to a world that in effect is tethered to dial up, rather than high speed Internet. So, rule number one with respect to the future: let's throw out the floppy disc. Let's get in line with the times.”

This news, coupled with recent announcements from the GAO (Government Accountability Office) that at least $10 billion in federal IT contracts are at risk of failing, mean that smart solutions providers will need to keep their ears to the ground in order to stay on top of client concerns, and which areas of the market hold the most opportunity for them.